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A multivariate analysis of savings, investment and growth in Nepal

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  • Budha, Birendra

Abstract

This paper examines the relationship between the gross domestic savings, investment and growth for Nepal using annual time series data for the period of 1974/75 to 2009/10. The study employs the Autoregressive Distributed Lag (ARDL) approach to test for cointegration and Error correction based Granger causality analysis for exploring the causality between the variables. Empirical results show that there exist cointegration between gross domestic savings, investment and gross domestic product when each of these is taken as dependent variable. Granger causality analysis shows that there exists short-run bidirectional causality between investment and gross domestic product as well as between gross domestic savings and investment. Nevertheless, no short-run causality is found between gross domestic savings and gross domestic product. Thus, the policy of accelerating growth by promoting investment works to some extant only since the long-run investment multiplier is below one.

Suggested Citation

  • Budha, Birendra, 2012. "A multivariate analysis of savings, investment and growth in Nepal," MPRA Paper 43346, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:43346
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    References listed on IDEAS

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    5. Nicholas Odhiambo, 2007. "Supply‐leading versus Demand‐following Hypothesis: Empirical Evidence from Three SSA Countries," African Development Review, African Development Bank, vol. 19(2), pages 257-280.
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    Cited by:

    1. Artur Ribaj & Fitim Mexhuani, 2021. "The impact of savings on economic growth in a developing country (the case of Kosovo)," Journal of Innovation and Entrepreneurship, Springer, vol. 10(1), pages 1-13, December.

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    More about this item

    Keywords

    gross domestic savings; gross fixed capital formation; gross domestic product;
    All these keywords.

    JEL classification:

    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment

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